In this article, we will take a look at the Top 11 Dividend Kings to Buy for Safe Dividend Growth.
Dividend Kings have earned a strong following among income investors because they have proven their ability to raise their dividends through different market cycles. For many investors, that kind of consistency can provide confidence that income will continue to grow over time.
That said, a long history of dividend increases does not automatically make a stock a good investment. To be classified as a Dividend King, a company must have increased its dividend for at least 50 consecutive years.
Reaching that milestone reflects a clear commitment to rewarding shareholders. Even so, no dividend is guaranteed. Morningstar Indexes strategist Dan Lefkovitz said companies with wide economic moats have historically been less likely to cut their dividends than those with narrow moats. Businesses without economic moats, he noted, face the highest risk of dividend reductions.
Investors should also pay attention to valuation. A company may have an outstanding dividend record, but buying the stock at an inflated price can hurt overall returns. Morningstar director of equity research Damien Conover said that purchasing a significantly overvalued stock simply for its dividend can lead to disappointing long-term results. In his view, investors should focus on three key factors together: valuation, the company’s ability to maintain and grow its dividend, and the strength of its economic moat.
Given this, we will take a look at some of the best Dividend Kings to invest in.
Our Methodology:
For this article, we scanned the list of dividend kings, which are the companies that have raised their payouts for 50 years or more. From that list, we picked 12 companies with the highest 5-year annual average dividend growth rates. The stocks are ranked in ascending order of their annual average dividend growth in the past five years.
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11. Consolidated Edison, Inc. (NYSE:ED)
5-Year Average Dividend Growth Rate: 2.44%
On June 2, Mizuho downgraded Consolidated Edison, Inc. (NYSE:ED) to Neutral from Outperform. It set a a $105 price target. The firm cited the company’s “constrained growth trajectory” and valuation as reasons for the downgrade. According to Mizuho, Consolidated Edison’s valuation discount relative to its peers is no longer compelling. The analyst noted in a research report that this leaves limited upside potential from current share price levels.
Earlier, on May 21, Morgan Stanley lowered its price recommendation on ED to $99 from $105. It reiterated an Underweight rating on the stock. The firm updated its price targets for North American Regulated & Diversified Utilities and Independent Power Producers (IPPs) for April. Morgan Stanley also pointed out that utility stocks underperformed the S&P this month, according to the analyst’s note to investors.
Consolidated Edison, Inc. (NYSE:ED) is a holding company that provides a range of energy-related products and services through its subsidiaries. These include Consolidated Edison Company of New York, Inc. (CECONY), Orange and Rockland Utilities, Inc. (O&R), and Con Edison Transmission, Inc.
10. Stanley Black & Decker, Inc. (NYSE:SWK)
5-Year Average Dividend Growth Rate: 3.47%
On June 18, Wells Fargo raised the firm’s price recommendation on Stanley Black & Decker, Inc. (NYSE:SWK) to $90 from $80. It reiterated an Equal Weight rating on the stock. The firm met with the company’s CFO, Pat Hallinan, and Investor Relations representative Michael Wherley in Toronto the previous day. According to Wells Fargo, management’s tone was upbeat and consistent with comments made during the firm’s CEO fireside chat the week before.
Earlier, on May 28, Morgan Stanley lowered its price goal on SWK to $84 from $87. It kept an Equal Weight rating on the shares. Analyst Christopher Snyder said the company continues to execute well as its restructuring efforts progress. Those improvements have supported higher gross margin and earnings-per-share estimates. At the same time, ongoing competitive pressures and a still-soft Tools & Outdoor market continue to weigh on the outlook, with few near-term catalysts expected to drive demand, the analyst noted in a research report.
Stanley Black & Decker, Inc. (NYSE:SWK) is a global provider of hand tools, power tools, outdoor products, and related accessories. The company also supplies engineered fastening solutions through its Tools & Outdoor and Engineered Fastening segments.
